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Home > A Tale of Two Fridas


A Tale of Two Fridas
By Your editor

Created 2012/03/12 - 10:46am

Bravo to Frida Ghitis, one of whose stocks was the 2nd best performer globally according to the Financial Times, up 6.5% in one week and also up 14.8% in the last month (local currency terms).

Which is not to say that there haven't also been underperformers: one of her Latin Americans, and a British bank and a South Korean industrial company, both covered by Vivian.

Allocation is not after all a matter of winning for a week, but of winning for a stretched out investment period of years. We don't aim at rapid price growth so much as steady growth.

Macquarie Research up writes from Singapore today:

We generally prefer equities over bonds. Within equities, we prefer developed markets over their emerging peers. In Asia, we are Overweight North Asia over Asean. Our conviction in these calls varies and with heavy policy interference everywhere, we acknowledge the need to be prepared for alternative outcomes.

Our sector allocation has a barbell risk profile to accommodate for this via Overweights in Technology, Financials and Telecoms.

Asset allocation matrix by country:

Overweight Neutral Underweight

China Korea Indonesia

Hong Kong Singapore Thailand

Taiwan Malaysia India

Philippines

(Source: Macquarie Research)

More for paid subscribers mostly from Britain, but also from Belgium, Israel, Mexico, Finland, South Africa, South Korea, Denmark, Spain, and Norway. Oh, and Canada.

*Today's news is that Carlos Slim Helu, the Mexican who is the richest man in the world, plans a new Internet television venture. Ora.TV, starring celebrity-interviewer Larry King. It is to be distributed in Latin America using Slim's American Mobil wireless network and other media, putting the focus back on our most recent yield stock purchase, Promotadora de Informationes SA, PRISA B convertible shares. Last Nov. Mr. Slim bought a 3.4% stake in PRISA I think as part of his tactical assault on television, in which he was not allowed to invest in Mexico because of his utter dominance of telephony. His Latin American TV empire,America Latina, with 13 mn subscribers via cable and satellite, operates in Brazil, Dominican Republic, and Argentina but not in Mexico itself.

Besides winning a friendly press with his PRISA investment, Slim also agreed to act as a door-opener in Latin America for the highly respected Spanish Polanco-family-owned newspaper, El Pais. PRISA is the Polanco family's holding company for its media assets which also include a stake in Le Monde of France.

Its NYSE listing resulted from a bailout of the Polancos in 2010 by Liberty Media (owned by financiers Martin E. Franklin and Nicolas Berggruen) of the USA. The buy assumed that the company could divest assets and resume payouts, but things got bogged down in regulatory concerns. Beyond the newspaper, PRISA owns the Santillana book-publishing house of which it wants to sell a minority stake. And its key holdngs include radio stations, and a healthy presence in television: sports stations, pay TV (via DTS of which Telefonicaowns over 20%), cable TV, free-to-air TV, and TV production. These operate not only in Spain but in Portugal (via Media Capital of which PRISA wants to sell 35%). It earns about 20% of its money in Latin America already.

In sentidocomun.co.mx, Eduardo Garcia writes that PRISA stock lost 80% of its value before Slim brought his ''prestige'' on board. Slim plans to help targeting Latin American expansion and innovation for what PRISA calls itself: the global periodical in Spanish. Moving into the USA Spanish-speaking market is another possibility according to a Madrid analyst, ''something like the BBC.''

Since Slim bought, PRISA common stock has fallen another 8.7% last week (before we bought) because it reported a euros 451 mn loss after provisions for investments it wants to exit in Portugal plus tax risks.

Eduardo quotes a spokesperson for Slim's Mexican investment vehicle saying that PRISA is ''a purely financial investment.'' If you believe that, I have a bridge you may want to buy.

We bought the 7% convertible B non-voting shares, which in May, 2015 will begin paying out 0.25% more every quarter to reach a 9% payout level (if there are earnings). From this May, we also are allowed to convert our B shares into common PRISA A shares at euros 3.75/sh raising to euros 4.875 over the following 3 years, and back to 3.75 after Year 5. This complex structure is dependent on PRISA selling assets and paying down debt to earn money.

*Note that Nicolas Berggruen who is the partner in the PRISA original benevolent bailout also owns a stake in Paddy Power. He is called the homeless billionaire but is really a turnaround artist. Berggruen is the son and heir of a German Jewish art dealer who fled to Portugal from the Nazis. The father, Heinz, was a buddy of Picasso's and is said to have had an affair with Frida Kahlo (the other Frida of our headline). The son, a 50-year-old bachelor with German and US nationalities, had a very international upbringing and now lives in hotels around the world. But he financed a California long-term reform plan which the electorate can vote on. When he was 15 at a Swiss boarding school he wrote a constitution for Utopia so this is consistent. Your editor who also tips PDYPF (PAP in Britain) is also the offspring of German-Jewish refugees.

*Meanwhile Nokia apparently plans to launch a 10-inch Windows tablet computer later this year powered byQualcomm's dual-core platform boosting Microsoft in taking on Google's Android and Apple's iPads.

*Sasol of South Africa, maker of gasoline from coal, reported H1 profit up 83% to rands 13.9 bn in the half year to Dec. 31 or 23.5/sh, helped by higher oil prices and a weaker rand. These offset lower production hurt by strikes. SSL uses the Lurgi or Fischer-Tropsch technology developed by Nazi Germany to make gasolene, diesel fuel, and jetfuel from coal and, increasingly, from natural gas. Its CEO David Constable wrote today that it is diversifying away from Iranian crude oil purchases because of fear of sanctions.

*''Merrill Lynch cited strong structural and cyclical trends for recommending Intertek, the UK-based quality, health, safety, and environmental inspection group which bought out Moody's (not the same one)'' writes Martin Ferera.

Merrill noted that IKTSF is heavily indebted but could be a target for its two main Euro-rivals, SGS of Switzerland and Bureau Veritas of France. (We used to own the latter via the holding co. Wendel & Cie in the minutewoman.com portfolio, WNDLF.) Merrill calls IKTSF ''a core holding'' and a ''buy'' with a well-managed business model that should deliver strong growth over the medium term'' and ''good EPS growth.'' It will benefit from legislation favoring more inspections, plus trends like outsourcing, industrial consolidation, expanding global trade, and the rise of middle class emerging markets consumers, says Merrill. It is heavily exposed to consumer businesses and smaller than its rivals. The thundering herd expects 8.5% organic growth this year plus a 1.5% gain from foreign exchange, and expects the stock to hit GBP 27 (up 15%).

Today IKTSF announced 2011 revenues up 27% to GBP 1.749 bn on which its before tax profit rose 23% to 260.1 mn (107.2 pence/sh). It raised its dividend 20% from last year to 33.7 pence/sh. The share is up today.

*Posco of South Korea will build a lithium and minerals test facility and engage in a strategic partnership with Chilean Li3Energy to test PKX's new technology which improves recovery and shortens process times for lithium production from brines. The demo plant will go live this year, probably in Chile. Separately it will build a 120 mW ultra-clean Direct Fuel Cell components using baseload fuel cellular energy produced for power plants using technology from FuelCell Energy of CT. PKX is also buying 19.9% of FCEL.

*BASF will invest in Allylix Inc, a US private renewable specialty chemical company making terpenese for flavor and fragrance, food additives, and cosmetics. BASFY.

*Seadrill signed a $184 mn deal to lease an offshore jack up rig to Saudi Arabia. SDRL is Norwegian.

*Teva and its partner Onco Genex extended their phase III clinical trial of Curtirsen to seek if the OGX drug works better against castrate resident prostate cancer in combination with Jevtana, a chemo drug. As this week's Economist points out, the prostate cancer race is wide open. We have a horse running, Bavarian Nordic, BVNKF.)

Separately, TEVA got US FDA approvals for its bronchospasm dose counter drug ProAir for patients as young as 4. The prior limit was children 12 and over.

*Barclays is among the British banks facing lawsuits from small businesses over their mis-selling of complex interest rate derivatives attached to loans. This was reported by The Telegraph, a British newspaper, yesterday. We sold half our BCS earlier.

*Also in Britain, the consensus recommendation for Tesco is now ''hold'', which means take the supermarket chain out of your shopping cart in normal English. TSCDY.

*G4S was upgraded to buy from hold by Panmure Gordon, a British brokerage, because of potential growth in UK police outsourcing operations. It raised its target for GFSZY to 330 pence from 250. G4S already earns about 1/3 of its revenue from UK govt outsourcing and the Olympics will add to this.

*UBS raised its target price for BG Group to 1785 pence which the Swiss bank says still is 10% below BRGYY's net asset value per share of 1982 pence. The upgrades reflect the offshore Brazilian oil finds and its operations in Australia.

*Frida Ghistis's top performing stock in Am Bev, the Belgian brewer which owns Stella Artois outright and Budweiser indirectly. Toast Friday with an ABV brew.

*Up in Canada the Bay St. brokerages are calling for you to hold (ie sell) Neo Materials NEMFF. Mackie, Royal Bank of Canada, Raymond James, and Canaccord Genuity all are now neutral meaning they think a higher offer is unlikely after Neo stock rose 15% on Friday. I'm in no rush.

Disclosure: I am long ABV, BCS, NOK, PKX.

Additional disclosure: ABV BASFY BCS BRGYY BVNKF GFSZY IKTSF NEMFF NOK PDYPF PKX PRIS.B all these are valid ticker symbolsthis is a test to see if I can post without going batty